Discretionary Bonus: What’s the Deal?

The more effort you put into recruitment, the more you get out of it. It’s one of the most meritocratic industries out there. This is why you see a direct correlation between consultants who spend a long time at one company billing huge numbers.

At almost every stage of recruitment, success is quantifiable. The numbers don’t lie.

You’ll find therefore, at the vast majority of companies, commission’s earned off the back of performance. Make placements, and your position on the sales board rises. But, more importantly your bank account starts to swell.

Great. Case closed.

Except it’s not always this straight forward.

Some companies reward on behalf of a team performance. This in itself is generally a nice touch if it’s on top of personal commission. It creates an element of togetherness, and will mean team spirit emanates in a traditionally seclusive job.

Outside of performance based incentives however there are certain companies that offer discretionary bonuses.

That’s, money in your bank at the discretion of the management. And it’s quite an intriguing model.

Is there a points based system governing how much discretion your manager has? Does aesthetics or personality come into play?

What happens if you’re at a company that rewards a consultant with lower numbers than you? Finding out in the first place may be difficult. It’s unlikely a colleague who’s more friendly with a manager would ever let on.

Some companies call it profit share. It might be paid monthly or annually, but usually at the end of every quarter.

Michael Page and Robert Walters are two of the recruitment industry’s best known brands that offer the discretionary bonus instead of commission.

So, what are the benefits?

From your employer’s perspective, offering a discretionary bonus allows them to recognise and reward a wide scope of behaviours, rather than focusing on the quick wins. This is particularly beneficial when 360 Recruitment is split up.

Having Account Management, Sales, Business Development and Research functions operating individually means success won’t be tied to just one person. This separation is likely to be in place at large companies.

Success isn’t purely measured by number of placements, and is tied to factors such as candidate performance and client satisfaction. In theory, this leads Recruiters to focus more on long-term value than short-term gains.

With agencies increasingly recognising the need to augment their service levels to retain long-term business and stave off the competition, discretionary bonuses can make sense. By expanding the emphasis away from just sales, it allows consultants to focus on a quality driven approach. This has immediate benefits for candidates, and is recognised by clients as a value add.

Ten Pound Note Close

Discretionary bonuses also enable employers to be more agile. Agility is normally linked with smaller firms, but large agile agencies can prevent layoffs during difficult times with the adoption of alternative methods.

During the recession, for example, purse strings were tightened very quickly and discretionary bonuses could have been significantly slimmed down for the benefit of the company as a whole.

This obviously has benefits for both employer and employee.

Another potential plus to the discretionary bonus is the greater reward it offers senior top performers. For the larger corporate brands especially, retaining these people is often fundamental to their success. In other more direct models, a lack of commission scheme can prevent senior consultants wanting to progress.

The discretionary bonus system means that pockets are lined from the top down. When performance is driven from the top downwards, it makes sense to offer a big carrot to those who climb up the ranks. The desire to reach the top is heightened and performances can flourish.

What are the drawbacks?

The major problem with the discretionary bonus in recruitment is the lack of transparency.

In practice, a recruiter who bills £40k in a month should take home more than a recruiter that bills £30k. But that’s not always the case. In the larger corporate firms, recruiters may expect to see around 10-12.5% of their revenue back, as a bonus.

But, companies offering a discretionary bonus have no obligation to pay anything out at all. Unlike earning commission, a discretionary bonus means you’re at the mercy of your company and manager. If they’re great and you get along brilliantly, there shouldn’t be any issues. But that is an if.

What if you don’t see eye to eye? What if they have favourites? What if they’re not a good leader?

What if you have a really slow first two quarters and are left needing to catch up in comparison to others in the team. But, then have a barnstorming second half of the year. Are you likely to get paid fairly on that? Or will it be a case of later placements making up for the lack of prior performance?

It’s also a question of motivation. One of the major attractions of a career in recruitment is the potential to control your own pay cheque. The drive, commitment and hunger, comes from the knowledge that the industry is completely meritocratic.

There are no doubt some positives to the discretionary bonus model in recruitment and there are plenty of Recruiters who thrive in this system. Indeed, the industry as a whole does have some way to go in terms of being more relationship and value orientated.

Perhaps the discretionary bonus can be seen as a step in the right direction?

Recruitment’s unique in that it’s so easily quantifiable. It is one of the only industries with a truly level playing field and one that can be completely objective, fair and transparent to its employees.

The biggest billers tend to gravitate towards where the reward is, and more often than not, the most rewarding companies have transparent commission structures that they use as a tool for employee attraction and retention. In fact if you’ve read this article or spoken with me on the phone about your employer brand you’ll know how vocal I am about publicising commission or bonus schemes.

If you’re advertising your employer brand, saying you pay a bonus or ‘uncapped commission’ is bordering on irrelevant information. It doesn’t provide the detail of merit. Just that there is some.

The argument over which scheme is best will largely depend on your own thoughts. Luckily, there are plenty of options out there for Recruiters who don’t want the system they’re on right now.